Sealed Air Corporation Q1 2010 Earnings Call Transcript

Sealed Air Corporation Q1 2010 Earnings Call Transcript
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Sealed Air Corporation (SEE)

Q1 2010 Earning Conference Call

April 28, 2010 11:00 AM ET

Executives

Amanda Butler – Director of IR

William Hickey – President and CEO

David Kelsey – SVP and CFO

Analysts

George Staphos – Bank of America

Ghansham Panjabi – Robert W. Baird

Rosemarie Morbelli – Ingalls & Snyder

Sara Majers – Wells Fargo

Mark Wilde – Deutsche Bank

Richard Skidmore – Goldman Sachs

Claudia Hueston – JPMorgan

Peter Ruschmeier – Barclays Capital

Al Kabili – Macquarie

George Staphos – Bank of America

Stuart Shaw – Standard & Poor’s

Mark Wilde – Deutsche Bank

Presentation

Operator

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Good morning, everyone, and welcome to the Sealed Air conference call discussing the company’s first quarter 2010 results. This call is being recorded.

Leading the call today William V. Hickey, President and Chief Executive Officer and David H. Kelsey, Senior Vice President and Chief Financial Officer. After managements’ prepared comments, they will be taking questions. (Operator Instructions)

And now, at this time, I would like to turn the call over to Amanda Butler, Director of Investor Relations. Please go ahead, Ms. Butler.

Amanda Butler

Thank you and good morning everyone. Before we begin our call today, I would like to remind you that statements made during this call stating managements’ outlook or predictions for the future are forward-looking statements. These statements are made solely on information that is now available to us. Our future performance may be different due to a number of factors. Many of these factors are listed in our most recent quarterly report on Form 10-K which you can find on our website at sealedair.com.

And now, I will turn the call over to Bill Hickey, our CEO. Bill.

William Hickey

Thank you, Amanda. Good morning, everyone. I am Bill Hickey, President and CEO of Sealed Air Corporation. With me on the call today in addition to Amanda, we have Dave Kelsey, our Chief Financial Officer.

During today’s call, I will be highlighting our business performance for the first quarter. Dave will then discuss details of our financial results. After Dave’s remarks, we will take your questions both from the phone lines and via text on our webcast.

This morning, we reported a 9% increase in our first quarter adjusted earnings per share of $0.36. This figure excludes a $0.01 charge related to our global manufacturing strategy program, which we highlighted in our press release this morning.

We are pleased with our earnings growth as we recognize that we are in the early stages of an economic recovery and we are managing through higher resin prices both on a prior year and a sequential basis.

Additionally, we generated comparable gross and operating profit margin versus last year. We achieved this to the benefits of not only favorable foreign exchange translation, but of higher volumes in new and existing products, strong growth in developing regions, stringent controls on operating expenses, and productivity improvements, which offset both on favorable resin costs and price mix.

Looking at the top line, first quarter sales increased 1% on a constant dollar basis. However, volume growth was a major contributor which increased 4% overall, largely driven by 8% increase in our protective packaging segment in North America, a 4% increase in our food packaging segment in North America, and a 10% increase in Latin America in food packaging as well.

Across all of our businesses, volume growth improved through the course of the quarter ending with solid March results. For example, using our protective packaging business, our sales in January were 99.6% of January 2009 as we still had not crossed the breakeven line in our recovery of the decline in sales from last year. February sales were a 103% of the comparable month into 2009 and March sales were 109% of comparable sales in March 2009.

We announced a price increase to be effective April 1

st

, so we didn’t wonder whether some of the March increase resulted from the price increase. And we look at our April sales month to date and we are tracking a 108% of April 2009. And I am pleased to say that we were expecting this type of trending to continue for the rest of the year.

Looking at volume trends in more detail, food packaging volumes increased 2%, largely driven by the 4% increase in North America and a 10% increase in Latin America that I previously mentioned. Our performance in both of these regions was above local animal production rates due to incremental volumes from new and existing customers and from new product expansion.

In North America, most products benefited from positive volume growth. And interestingly, the primary volume driver was a 43% increase in equipment as customers started to reinvest in replacement equipment during the first quarter.

Western European volumes remained weak due to prolonged economic weakness and very low consumer confidence levels. But on a bright note, we did see ongoing growth in Eastern Europe, particularly in Russia, where we achieved double-digit volume increases.

Food solutions had similar regional results led by a 6% increase in North America due to strong poultry case ready sales and ongoing product expansion, including a new star fresh film for fresh fish which was launched at a large multinational retailer in the first quarter.

Additionally, food solutions had an 18% increase in the Asia-Pacific region due largely to growth in case ready and ready meals. Like our food packaging business, the food solutions team deserved the onset of recovery in all the regions, except Western Europe, where conditions remained weak. We did see strength in developing regions, again with very solid sales growth of greater than 50% in Russia due to strong case ready program in that country.

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